Pick n Pay suppliers in food prices blame game

The pricing blame game by some of SA's major food suppliers played itself out at a keenly awaited meeting yesterday, called by Pick n Pay last week to discuss high prices.

Pick n Pay said then that it found itself unable to pass on the price benefits of the recent drop in fuel prices, the reason cited last year when food prices rocketed in tandem with sky high oil prices.

Several of these suppliers turned the blame yesterday on their own suppliers, principally in the packaging sector, prompting Pick n Pay CEO Nick Badminton to say after the meeting he had been told that there may be anticompetitive practices affecting its suppliers.

Badminton said there was “quite a bit of discussion” about monopolies at the meeting, which 25 of the company's suppliers attended. He said Pick n Pay's suppliers were “facing pressure from their suppliers”, and concerns over the tin and glass industry were raised.

Possible areas of monopoly in input items were identified and suppliers were encouraged to report these to the Competitions Commission, he said.

Badminton said further investigation may also be required in the packaging, paraffin wax and fertiliser sectors.

Premier Foods CEO Ian Visser said, “During the meeting all aspects of the supply chain were discussed, and the issue of monopolies was one issue which we agreed should be examined in the long term.” Visser said input costs were more complicated than one isolated cost, such as the price of diesel.

Abdul Razak Moosa, CEO of Willowton Oil, one of Pick n Pay's suppliers, told Business Day he had reported paraffin wax supplier Sasol to the Competition Commission late last year for abuse of dominance.

Moosa said affidavits were being prepared. He alleged that the company was hiding behind input parity costs and the rising fuel price.

Moosa also alleged Sasol had its own candle making company and that it cut off wax supplies to other manufacturers when demand rose. It was cheaper to import paraffin wax than to buy locally, a monopoly that harmed the “poorest of the poor”.

The commission said information had been received, but that an official complaint had yet to be lodged.

Jacqui O'Sullivan, Sasol group communication manager, said she was not aware of a complaint lodged by Willowton Oil. However, Sasol was looking into the allegation.

Badminton said the suppliers needed to raise the issue of monopolies with the competition authorities. He said it was difficult to say what the effect on the consumer would be.

Competition Commission manager of strategy and stakeholder relations Nandi Mokoena said information from suppliers would be welcomed.

Monopolies were only a problem when there was an abuse of dominance, she said.

The commission was already investigating anticompetitive practices in the fertiliser and food industry.

Pioneer Foods MD Andre Hanekom said the group had passed on, and would continue to pass on, savings where it could. However, Pioneer faced increases in items other than fuel that it would have to pass on to its customers.

Badminton said Pick n Pay would fight any behaviour that appeared to be anticompetitive.

It would also oppose any areas in which it saw a concentration of power and would put in place a strategy to develop alternative sources of supply where concentration was most felt.

He felt the supplier industry was not diverse enough.

Badminton said the meeting, which he described as “constructive”, had given all parties a better understanding of the pressures each faced.

It was a high-level meeting, because of the concerns around competition issues, which a competition lawyer monitored.

“The issues affecting the supply chain in SA will require thorough investigation and calm heads and will not be fixed overnight, but this is a very good start.

“Follow-up meetings with every single supplier present will be held over the next few weeks.”

The suppliers who did not attend had raised concerns about the meeting being in breach with competition law and would meet with Badminton individually, he said.

Chris Gilmour, an analyst with Absa Asset Management Private Clients, said monopolies created an environment that was not conducive to negotiation, which could result in inflated prices being passed on to the consumer.

He said some items could not be imported in order to avoid a monopoly as these were subject to import parity.

The issue of import parity, which affects commodities such as steel and fuel, was also raised at the meeting.

Source: Business Day

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